Q4 2023 Permian Resources Corp Earnings Call

Operator: www.larryweaver.com Good morning, and welcome to the Permian Resources conference call to discuss its fourth quarter and full year 2023 earnings. As a result, these calls are being recorded. A replay of the call will be accessible until March 13, 2024 by dialing 877-674-7070 and entering the replay access code 855-841, or by visiting the company's website at www.permianres.com. At this time, I will now turn the call over to Hays Mabry, Permian Resources' Senior Director of Investor Relations, for some opening remarks. Please go ahead.

Good morning, and welcome to Permian Resources Conference call to discuss its fourth quarter and full year 2023 earnings today's call is being recorded.

The call will be accessible until March 13, 2024 by dialing 877674070 and entering the replay access code 858.

841 or by visiting the Companys website at Www Dot Permian risks dot com at.

Speaker Change: At this time I will now turn the call over to <unk> Permian resources Senior director of Investor Relations for some opening remarks. Please go ahead.

Hays Mabry: Thanks, John, and thank you all for joining us for the company's fourth quarter. Thank you, for the whole year, on the call today, will hit www.thevenusproject.com, who are chief executives, and Guy Ault. Chief. Yesterday, February 26, and Ernie.

John: Thanks, John.

Speaker Change: And thank you all for joining us.

Speaker Change: On the company's fourth quarter and full year 2023 earnings call.

Speaker Change: On the call today.

Speaker Change: Or will Hickey and James Walter.

Speaker Change: <unk> executive officers.

Speaker Change: And <unk> our.

Speaker Change: Our Chief Financial Officer.

Speaker Change: Yesterday February 27th.

Speaker Change: We filed a form 8-K with.

Speaker Change: It's an earnings release reporting fourth quarter results.

Hays Mabry: We also posted an earnings presentation on our website. We will rest, today's call. I would like to know, and many of the comms.

We also posted an earnings presentation to our website.

Speaker Change: We will reference during today's call.

Speaker Change: I would like to note that many of the comments during this earnings call.

Hays Mabry: During this early, a forward-looking statement. Risks that could affect our actual results and you are beyond their control and are discussed in more. Risk Factor and forward-looking statement sections of our file, expected to be filed tomorrow. Although we believe the expectations expressed are based on a reasonable assumption. They are not guaranteed, and Actual Results, for Development. We may also refer to non-GAAP financial measures that help facilitate comparisons across periods, and with them, for any non-GAAP measure, a reconciliation to the nearest corresponding gap measure can be found in our earnings, for presentation, which are both available on our website.

Speaker Change: Our forward looking statements that involve risk and uncertainties.

Speaker Change: That could affect our actual results and plans.

Speaker Change: Many of these risks are beyond our control.

Speaker Change: Excuse me and are discussed in more detail in the risk factors and the forward looking statements sections of our filings with the SEC.

Speaker Change: Including our Form 10-K.

Which is expected to be filed tomorrow afternoon.

Speaker Change: Although we believe the expectations expressed are based on reasonable assumptions there.

Speaker Change: They are not guarantees.

Speaker Change: <unk> performance.

Speaker Change: And actual results or developments may differ materially.

Speaker Change: We may also refer to non-GAAP financial measures.

Speaker Change: Help facilitate comparisons across periods.

And with our peers.

Speaker Change: For any non-GAAP measure we use.

Speaker Change: A reconciliation to the nearest corresponding GAAP measure.

Speaker Change: Can be found in our earnings release or presentation.

Speaker Change: Are both available on our website.

Will Hickey: With that, I will turn the call over to Will Hickey, co-CEO. Thanks, Hays. We're excited to share our fourth quarter and full year 2023 results, as Permian Resources was able to deliver another quarter of outperformance, closing out an incredible first year of operations under the PR name. I think that over the past five quarters, we've demonstrated just how good this Permian Pure Play business is, operating efficiently on our core Delaware assets, executing on highly accretive deals, and continuing to demonstrate low-cost operatorship As we look to 2024, we expect to continue maximizing shareholder value, and I want to take a moment to walk you through how we think about value creation here at PR. Our relentless focus is on creating value on a per share basis.

Speaker Change: With that I will turn the call over to Wil Hickey co CEO. Thanks Jay.

Wil Hickey: We're excited to share our fourth quarter and full year 2023 results as Permian resources is able to deliver another quarter of outperformance closing out an incredible first year of operations under the PR name.

Wil Hickey: Over the past five quarters, you've demonstrated just how good this Permian pure play business is operating efficiently on our core Delaware assets executing on highly accretive deals.

Wil Hickey: And to demonstrate low cost operator ship across the business, which all contribute to <unk> industry, leading returns since inception.

Wil Hickey: As we looked at 2024, we expect to continue maximizing shareholder value and I wanted to take a moment to walk through how we think about value creation here at PR, a relentless focus is on creating value on a per share basis, and our team has positioned us to deliver a 2024 plan that's expected to generate peer leading production cash flow and free cash flow per share growth without increasing leverage.

Will Hickey: And our team has positioned us to deliver a 2024 plan that's expected to generate peer-leading production, cash flow, and free cash flow per share growth without increasing leverage. We're able to drive this outsized growth per share through PR's continued focus on being the lowest cost operator in Delaware, our thoughtful capital allocation and development plan, and the highly accretive transactions we completed during the year. In the midst of closing the Earthstone acquisition on November 1st, the Permian Resources team was still able to deliver an outstanding fourth quarter across all metrics. Q4 production outperformed with total production of 285,000 barrels of oil equivalent per day and oil production of 137,000 barrels per day, exceeding both internal and external expectations. This production delay was attributable to three things.

Wil Hickey: We're able to drive this outsized growth per share through Prs continued focus on being the lowest cost operator in the Delaware are thoughtful capital allocation and development plan and the highly accretive transactions, we completed during the year.

Wil Hickey: In the midst of closing the <unk> acquisition on November one.

Wil Hickey: The Permian resources team was still able to deliver an outstanding fourth quarter across all metrics.

Wil Hickey: Q4 production outperformed with total production of 285000 barrels of oil equivalent per day and oil production of 137000 barrels per day.

Wil Hickey: Exceeding both internal and external expectations.

Wil Hickey: Production beat was attributable to three things first and most significantly we saw outperformance across the board between both PR and legacy <unk> assets second a reduction in downtime on legacy <unk> assets led to higher than expected run times as the team realized operational synergies more quickly than planned.

Will Hickey: First and most significantly, we saw outperformance across the board between both PR and Legacy Earthstone assets. Second, a reduction in downtime on legacy Earthstone assets led to higher-than-expected runtimes as the team realized operational synergies more quickly than before. Third and finally, our drilling and completion efficiencies continue to impress, bringing incremental wells and producing days into the core. Even with the increased activity, capital expenditures were in line due to per unit cost reductions, leading to significant free cash flow outperformance.

Wil Hickey: Third and finally, our drilling and completion efficiencies continued to impress bringing incremental wells and producing days into the quarter.

Wil Hickey: Even with the increased activity capital expenditures were in line to the per unit cost reductions leading to significant free cash flow outperformance in the quarter.

Will Hickey: Our team was also able to transition seamlessly into integration and synergy capture mode in the fourth quarter, executing on our proven integration playbook while maintaining focus on driving low-cost leadership across the board. PR continued to increase operational efficiencies in the fourth quarter while integrating legacy Earthstone rigs and fleets into its program, contributing to overall program decreases in per well unit costs that we've been able to carry forward into the full year 2024, culminating in a program average of $860 per lateral. In addition, the team demonstrated strong controllable costs. This was driven largely by lower LOE, with controllable cash costs decreasing 8% quarter over quarter to $7.33 per BOE, despite higher legacy earthstone costs. Overall, our strong production and low-cost structure allowed PR to report 47 cents per share of adjusted free cash flow, or $332 million in aggregate.

Wil Hickey: Our team was also able to transition seamlessly into integration and synergy capture mode in the fourth quarter executing on our proven integration playbook, while maintaining focus on driving low cost leadership across the business.

Wil Hickey: <unk> continued to increase operational efficiencies in the fourth quarter, while integrating legacy <unk> rigs in fleets into its program.

Wil Hickey: <unk> to overall program decreases in per well unit cost that we've been able to carry forward into the full year 2024 plan, culminating in a program average of $860 per lateral foot.

Wil Hickey: In addition, the team demonstrated strong controllable cost discipline, driven largely by lower LOE with controllable cash costs, decreasing 8% quarter over quarter to $7 33 per Boe, Despite higher legacy <unk> costs overall, our strong production and low cost structure allowed PR to report 47 per share of adjusted free.

Wil Hickey: Cash flow or $332 million in aggregate.

Will Hickey: In addition to our focus on execution, we believe our Portfolio Optimization Program will continue to drive meaningful value for shareholders. As many of you saw last month, Permian Resources announced a series of transactions that added 14,000 net acres and 5,300 net rural acres in the core of the Delaware Basin, just three months after closing the $4.5 billion Earthstone acquisition. Most notably, the two bolt-on acquisitions at over 100 high-return locations directly offset our core parkway position, which represents one of the highest-returning assets within our portfolio. This is in addition to a sizable acreage swap, a non-core divestiture, and our ongoing ground. Importantly, when you combine all of our portfolio management efforts from the last year, our inventory additions more than replaced the wells we We believe that excellent execution on these types of difficult transactions and smaller deals is a great path towards material improvements in our inventory position, NAV, and overall value proposition to stakeholders, and will continue to be a key focus for us going forward....

Wil Hickey: In addition to our focus on execution, we believe our portfolio optimization program will continue to drive meaningful value for shareholders as.

Wil Hickey: As many of you saw last month, Permian resources announced a series of transactions, which added 14000 net acres 5300 net royalty acres in the core of the Delaware Basin, just three months after closing the $4 5 billion or stone acquisition.

Wil Hickey: Most notably the two bolt on acquisitions add over 100 high return locations directly offset our core parkway position, which represents one of the highest returning assets within our portfolio.

Wil Hickey: This is in addition to a sizeable acreage swap in non core divestiture and our ongoing ground game.

Importantly, when you combine all of our portfolio management efforts in the last year, our inventory additions more than replace the wells, we drilled on a standalone basis.

Wil Hickey: We believe that excellent execution on these type of difficult transactions in smaller deals, there's a great path towards material improvements in our inventory position.

Wil Hickey: And overall value proposition to stakeholders, we will continue to be a key focus for us going forward.

Will Hickey: Our excellent Q4 results and increased free cash flow allowed us to deliver a total return of capital of $0.24 per share to shareholders during this time. We announced a $0.05 per share base quarterly dividend, and we are excited to be able to demonstrate sustainable base dividend growth as we plan to increase our base dividend by 20% to $0.06 per share next quarter. In addition, we remain committed to paying 50% of the remainder of free cash to the shareholders via dividends and or buybacks, and once again, we executed both methods of variable returns during the quarter. First, we repurchased a total of 5 million shares at an aggregate price of $13.32 per share for the quarter.

Wil Hickey: Our excellent Q4 results and increased free cash flow allowed us to deliver total return of capital of 24 per share to shareholders. During the quarter, we announced a <unk> <unk> per share base quarterly dividend and we are excited to be able to demonstrate sustainable base dividend growth as you plan to increase our base dividend by 20% to <unk> <unk> per share next quarter.

Wil Hickey: In addition, we remain committed to paying 50% of the remainder of free cash flow to shareholders via dividends <unk> buybacks and once again, we executed both methods of variable returns during the fourth quarter first we repurchased a total of 5 million shares at an aggregate price of $13 32 per share for the quarter and consistent with our framework, we announced an incremental variable.

Will Hickey: And consistent with our framework, we announced an incremental variable dividend of $0.10 per share, bringing the all-in quarterly return of capital to $0.24 per share. As I mentioned before, our team has absolutely hit the ground running with the integration and synergy capture phase of the Earthstone acquisition. We are well ahead of schedule, giving us a high level of confidence that we will be able to beat the original Synergy Target Timeline laid out in August. Importantly, drilling and completion costs and efficiencies were realized almost immediately, with a 12% DNC savings per well already realized on the Legacy Earthstone Wells in Morton. I want to take a second to highlight the amount of effort that's gone into that 12% cost reduction per well since closing the Airston acquisition because it's not just swapping out rigs or changing a casing. Slide 6 shows around 10 drivers, but in reality, it's close to 40-plus small initiatives that add up to meaningful improvements, and our team has not stopped pushing on those.

Wil Hickey: <unk> of <unk> <unk> per share, bringing the all in quarterly return of capital to 24 cents per share.

Wil Hickey: As I mentioned before our team is absolutely hit the ground running with the integration and synergy capture phase of the Archstone acquisition.

Wil Hickey: We're well ahead of schedule, giving us high level of confidence that we'll be able to beat the original synergy target timeline laid out in August.

Wil Hickey: Accordingly, Julian completion cost inefficiencies realized almost immediately at closing with a 12% D&C savings per well already realized on the legacy <unk> wells and more to come.

Speaker Change: I want to take a second to highlight the amount of effort that's gone into that 12% cost reduction per well since closing the <unk> acquisition, because it's not just swapping out rigs or changing the casing design slide.

Speaker Change: Slide six shows around 10 drivers, but in reality is close to 40, plus small initiatives that add up to meaningful improvements in our team has not stopped pushing on those efforts.

Will Hickey: Two of the largest savings, drilling and completion efficiencies, have improved by 35% and 20%, respectively, versus historical Earthstone results, as equipment has been high-graded and best practices have been shared across the unified. These faster drill and completion times both reduce cost and improve returns by shortening cycles. Our field operations team has also made incredible progress on the LOE front, optimizing production operations in many large and small facilities. We couldn't be more pleased with the Synergy results to date and look forward to providing another positive update next quarter. The same relentless focus on low-cost leadership that allows us to maximize synergies in the Earthstone acquisition also allows us to drive controllable cash costs to purely zero. Our 2024 plan, which James will outline here in a minute, benefits from lower-than-expected all-in costs, with the combined business able to basically get back to PR's legacy cost structure despite higher historical or stone costs. Given the marginal nature of free cash flow, running With that, I'll turn it over to James to talk through 2020. Thanks, Will.

Speaker Change: Two of the largest savings drilling and completion efficiencies have improved by 35% and 20% respectively versus historical Archstone results as equipment has been high graded and best practices have been shared across the unified team.

Speaker Change: These faster drilling completion times, both reduce costs.

Speaker Change: And improve returns by shortening cycle times.

Speaker Change: Our field operations team has also made incredible progress on the LOE front optimizing production operations in many large and small ways. We couldnt be more pleased with the synergy results to date and look forward to providing another positive update next quarter.

Speaker Change: The same relentless focus on low cost leadership to allows us to maximize synergies and the <unk> acquisition also allows us to drive controllable cash cost at peer leading levels.

Speaker Change: Our 2024 plan, which teams are outlined here in a minute benefits from lower than expected all in cost, but the combined business able to basically get back to <unk> legacy cost structure, despite higher historical archstone costs.

Speaker Change: Given the margin nature of free cash flow running a low cost business is critical to supporting strong free cash flow per share generation.

Speaker Change: That I will turn it over to James to talk through 2024 plan things will turn to slide eight we are excited discuss our 2024 development program, which is focused on maximizing returns and free cash flow per share through thoughtful capital allocation and efficient low cost execution.

James: Turning to slide eight, we're excited to discuss our 2024 development program, which is focused on maximizing returns and free cash flow per share through thoughtful capital allocation and efficient low-cost execution. This plan is the result of a tremendous amount of work from every department at Permian Resources, and we want to thank our entire team for the work that went into this plan. Our goal is to focus on high-return developments in the Delaware Basin that allow the company to maximize returns while ensuring we minimize any future well or location degradation. Fortunately, our robust inventory allows us to drill similar zones, areas, and packages to what we drilled in 2023 and, as such, achieve similar well productivity. For the full year 2024, we expect total production to average between 300,000 and 325,000 BOE per day, and oil production to average between 145,000 and 150,000 barrels of oil per day. We expect production to be in the lower half of the full range during the first half of 2024, and in the upper half during the back half of the year. Our capital program consists of approximately $2 billion, of which 75% is allocated to drilling and completion operations.

James Walter: Our plan as a result of a tremendous amount of work from every department in Permian resources, and we want to take thank our entire team for the work that went into this plan.

James Walter: Our goal is to focus on high return development in the Delaware Basin that allowed the company to maximize returns, while ensuring we minimize any future well or location degradation.

James Walter: Fortunately, our robust inventory allows us to drill similar zones areas and packages to what we drilled in 2023 and as such achieved similar well productivity.

James Walter: For the full year 2024, we expect total production to average between 300 and 325000 Boe per day and oil production to average between 145 and 150000 barrels of oil per day, we expect production to be in the lower half of the full range. During the first half of 2020 for it in the upper half during the back half of the year.

James Walter: Our capital program consists of approximately $2 billion of which 75% is allocated to drilling and completion operations. We expect to turn in line 250 wells. This year. The balance is primarily investments in infrastructure that positions <unk> to continue to drive value in 'twenty 'twenty four and years beyond.

James: We expect to bring in line 250 wells this year. The balance is primarily investments in infrastructure that position PR to continue to drive value in 2024 and years beyond. In terms of CAPEX cadence, we expect CAPEX to be slightly front-weighted. Our drilling program is largely focused on our high-returning Delaware Basin asset, with a particular emphasis on the New Mexico portion of the Delaware, given the returns we are seeing from those assets today. The Midland Basin will not be a substantial part of our development plan in 2024.

James Walter: In terms of Capex cadence, we expect capex to be slightly front half weighted.

James Walter: Our drilling program is largely focused on our high returning Delaware basin asset with a particular emphasis on the new Mexico portion of the Delaware given the returns we're seeing from those assets today.

James Walter: In the Midland Basin will not be a substantial part of our development plan in 2024.

James: As we mentioned, we expect our controllable cash cost to be approximately $8 for BOE, which screens well relative to other operators in the Permian and is particularly impressive given the higher legacy cost structure that came over from the Airstone assets. Turning to slide 9, we wanted to concisely lay out how our business is getting better this year through the lens of capital efficiency related metrics. Simply put, in 2024, we expect our costs to be lower and our well productivity to be the same or slightly better than last year, which is a winning combination. However, we would also like to highlight that these improvements in capital efficiency do not come easy.

James Walter: As we mentioned, we expect our controllable cash cost to be approximately $8 per Boe.

James Walter: With screens well relative to other operators in the Permian and is particularly impressive given the higher legacy cost structure that came over from the Archstone assets.

James Walter: Turning to slide nine we wanted to concisely lay out how our business is getting better this year through the lens of capital efficiency related metrics.

James Walter: Simply put in 2024, we expect our cost to be lower and our well productivity to be the same or slightly better than last year, which is a winning combination.

James Walter: We would also like to highlight that these improvements in capital efficiency do not come easy.

James: Our team is focused on maximizing value by analyzing every input into our model on a per unit basis and looking for areas to improve. We moved very quickly to leverage our increased size and scale to receive better pricing on key consumables, such as casing and sand, but some key input costs, such as drilling rigs and pressure pumping, remain at elevated prices as we head into 2024. Our team continues to find ways to do more with less, and we are always looking for ways to tweak and optimize well designs. We find that these individual changes only reduce costs by a percentage point or two, but the cumulative effect adds up to real dollars when multiplied over a 250-well program. This hard work drives our base and leading cost structure and really makes a difference in our ability to extract as much value from every single asset as possible. I'd like to conclude today's prepared remarks with slide 11, which helps to reemphasize our value proposition for current and future investment. Since the formation of Permian Resources, we have delivered best-in-class returns for our sector and meaningfully outperformed the S&P 500. This outperformance was largely driven by successful execution, low-cost leadership, and accretive acquisition.

James Walter: Our team is focused on maximizing value by analyzing every input into our model on a per unit basis and looking for areas to improve.

James Walter: We moved very quickly and leveraging our increased size and scale to receive better pricing on key consumables, such as casing in sand, but some key input cost such as drilling rigs and pressure pumping remain at elevated prices as we head into 2024.

James Walter: Our team continues to find ways to do more with less and we're always looking for ways to tweak and optimize well designs and find that these individual changes only reduce costs by a percentage point or two but the cumulative effect adds up to real dollars when multiplied over 250 well program.

James Walter: This hard work drives our basin, leading cost structure and really makes a difference in our ability to extract as much value from every single asset as possible.

James Walter: I'd like to conclude today's prepared remarks on slide 11, which helps to reemphasize our value proposition for current and future investors.

James Walter: Since the formation of Permian resources, we have delivered best in class returns for our sector and meaningfully outperformed the S&P 500.

James Walter: This outperformance was largely driven by successful execution low cost leadership and accretive acquisitions.

James: As a result, our business continues to represent a compelling value proposition against other large-cap oil companies. Compared to some of the recent deals announced, there are fewer and fewer Permian Pure Plays solely focused on the highest returning base in the lower 48. It's worth emphasizing that Permian Resources now sits in a new class of large-scale peers with an enterprise value of greater than $15 billion and 100% of our business focused on the Permian. It continues to be our belief that quality businesses such as ours, with core assets in the Permian, efficient operations, and strong production and free cash flow for share growth, have room to re-rate the higher multiples. By continuing to cultivate and enhance these attributes for efficient execution and opportunistic transactions, such as our acquisitions, we believe that we can continue to create outsized value for shareholders and solidify our position as a leader in the energy sector.

James Walter: As a result, our business continues to represent a compelling value proposition against other large cap oil companies.

James Walter: Some of the recent deals announced there are fewer and fewer Permian pure play solely focused on the highest returning basin in the lower 48.

James Walter: It's worth emphasizing a Permian resources now sits at a new cost of large cap peers with an enterprise value of greater than $15 billion and 100% of our business focused on the Permian.

James Walter: It continues to be our belief that quality businesses, such as ours with core assets in the Permian efficient operations and strong multiple strong production and free cash flow per share growth have room to re rate the higher multiples.

James Walter: By continuing to cultivate enhance these attributes to efficient execution and opportunistic transactions such as our stones. We believe that we can continue to create outsized value for shareholders and solidify our position as a leader in the energy sector.

James: Thank you for tuning in today, and now we will turn it back to the operator for Q&A. Ladies and gentlemen, we will now have a question and answer session. If you have a question, please press star followed by the number 1 on your touchtone phone. You will hear a 3-tone prompt acknowledging your request. If you would like to cancel your request, please press start. Please ensure you leave the handset if you are using a speakerphone before pressing any key.

Speaker Change: Thank you for tuning in today and now we will turn it back to the operator for Q&A.

Speaker Change: Yes.

Speaker Change: Thank you, ladies and gentlemen, we will now.

Speaker Change: South Dakota I.

Speaker Change: Question and answer session.

Speaker Change: If you have a question. Please press star followed by the number one on your Touchtone phone you would hear at the <unk> prompt acknowledging your request.

Speaker Change: I would like to cancel your request please press star two.

Speaker Change: Please ensure your mute the handset that youre using a speakerphone before Brexit any DS.

Scott Hanold: Your first question comes from the line of Scott Hanold from RBC Capital Markets. Your line is now open. Yeah, thanks. You know, great quarter, guys. And, you know, good to see those synergies coming in faster than expected. And, you know, if we turn to page six, where you kind of walk down the Hearthstone cost to where they're at right now, could you give us a sense of, as you look at the current cost and bring that down to the PR legacy costs, like, what are really the areas where that difference is going to be occurring and how fast can you do those And so is it drilling efficiencies, casing, like, you know, what gets you to the PR well cost and how quickly can you get there? Yeah, look, I think we've made... Frankly, we've gotten here way faster than I thought we would.

Scott Hanold: Your first question comes from the line of Scott panel from RBC capital markets. Your line is now open.

Scott Hanold: Yeah. Thanks.

Scott Hanold: Great quarter, guys and good to see those synergies coming in faster than expected in <unk>.

Scott Hanold: If we turn to page six where you kind of walk down the <unk> costs to where they're at right now could you give us a sense of as you look at the current cost and bring that down to the to the PR legacy costs like what are really the areas where that difference is going to be.

Scott Hanold: Occurring and how fast can you do those and so that drilling efficiencies casing like what gets you to the PR well costs and how quickly can you get there.

Speaker Change: Yes look I think we've made.

Speaker Change: Frankly, we're way we've gotten your way faster than I thought we would be if you think about the five <unk> rigs that we picked up we've already swapped out three of them just three months post close and.

Will Hickey: If you think about the five Earthstone rigs that we've picked up, we've already swapped out three of them just three months post-close. And we were able to get our casing design implemented. So, effectively, on day one, we were in a four-tip position.

Speaker Change: And we're able to get our casing design implemented.

Speaker Change: Effectively day, one we referred to in a fortunate position they didn't have a big backlog of cases that we had to choose through before we can start running our wellbore design and our casing. So that's how we were able to achieve such dramatic cost reduction in just three months and if you think kind of what omnicom. It's the stuff, it's not the kind of pricing power. We've already implemented all of that it's more kind of to go build the last bit of efficiencies across.

Will Hickey: They didn't have a big backlog of casing that we had to chew through before we could start running our wellbore design in our casing. So that's how we were able to achieve such a dramatic cost reduction in just three months. And if you think kind of what's coming next, it's not the kind of pricing power we've already implemented all that. It's more to go build the last bit of efficiencies across all the ear stone equipment.

Scott Hanold: All of the Archstone equipment. So we've got two more rigs you'll have to kind of either get up to our standards or swap out over time, we will have to kind of continue to drive a few more efficiencies on the drilling and frac side, but we're we're more than halfway there to where we are trying to get to and we've done that in just three months. So I'd say, we're feeling really good about both the absolute quantum of dollars that we'll be able to cut from the western world.

Will Hickey: So we've got two more rigs that we'll have to kind of either get up to our standards or swap out over time. We'll have to kind of continue to drive a few more efficiencies on the drilling and frac side. But we're more than halfway there to where we're trying to get to, and we've done that in just three months. So I'd say we're feeling really good about both the absolute quantum of dollars that we'll be able to cut from the ear stone well cost and also the time to get there. understood.

Scott Hanold: Costs and also the time to get there.

Speaker Change: Understood and and as we think about the 2020 for activity and budget.

James: And as we think about the 2024 activity and budget, you know, it looks like it's sort of maintaining your current pace coming into the year. But, you know, with you all seeing better efficiency and performance, you obviously pulled a few wells into 2023. Would that allow you guys to reduce? www.permianresource.com Yeah, I think there's two answers I'll give.

Speaker Change: It looks like it's it's sort of maintaining your current pace coming into the year Budd.

Speaker Change: With you all seeing better efficiencies and performance you, obviously pulled a few wells into 2023.

Speaker Change: Would that allow you guys to reduce.

Speaker Change: <unk>.

Speaker Change: The well count next year and the rig count or would you guys. Just produced at a higher level. If your efficiencies continue through next year. So it's really a question on pace of next year and if you keep going faster will will you just kind of keep rolling through that.

James: I'd say first, just as we think about the pace of activity, I would say just as our business has gotten bigger and working interest has moved around a little bit, we're much more focused on kind of the total quantum of dollars that we want to reinvest, kind of what is the capital dollar budget. And I would say that's kind of how we're thinking about activity. I think, as you will see this year, we've got 12 rigs running today.

Speaker Change: Yes, I think theres two answers I'll give I'll take first just as we think about pace of activity I'd say, just as our business has gotten bigger and working interest moved around a little bit we're much more focused on kind of the total quantum of dollars that we want to reinvest kind of what is the capital dollar budget and I'd say, that's kind of how we're thinking about activity I think as you follow this year.

Speaker Change: We've got 12 rigs running today and you can see that number move up and down around 11% to 12% throughout the year just as we are optimizing both the rig fleet as we continue to swap out and bring in better rigs, but also kind of optimizing around larger pads et cetera. So more of a focus on I think you'll see a relatively consistent capital profile around that.

James: And you can see that number kind of move up and down around, you know, 11 to 12 throughout the year, just as we're optimizing both the rig fleet as we continue to swap out and bring in better rigs, but also kind of optimizing around larger pads, etc. So more of a focus on I think you'll see a relatively consistent capital profile around that total capital budget of 2 billion. And then yeah, as you get to year end, and you get to these weird things where you know, are we going to bring wells into the quarter, are we willing to spend more and whatnot, I'd say we'll take it on a case by case basis. But historically speaking, when our per unit costs are the lowest they've ever been, because efficiencies are the highest they've ever been.

Speaker Change: Total capital budget of $2 billion.

Speaker Change: And then as you get to year end and you get to these weird things where are we going to if we bring wells in the quarter are we willing to spend more and whatnot I would say we will take it on a case by case basis, but historically speaking when our per unit costs are the lowest they've ever been because efficiencies are the highest they've ever been.

Scott Hanold: And returns are very, very good, like they were in Q4, just two or three months ago. We lean towards, we'll go ahead and kind of bring in the extra wells on, add value to the business, focus on the long term, as opposed to doing some kind of cute things on a quarter-to-quarter basis. Great. Makes sense.

Speaker Change: And returns are very very good like they were at in Q4, just two or three months ago.

Speaker Change: We lean towards we will go ahead and kind of bring the extra wells on add the value of the business focused on the long term as opposed to doing some kind of key things on a quarter to quarter basis.

Speaker Change: Great makes sense. Thanks.

Neal Dingmann: Thanks. Your next question comes from the line of Neal Dingmann from Trubis. Your line is now open.

Speaker Change: Your next question comes from the line of Neal Dingmann from Lewis. Your line is now open.

Will Hickey: Good morning, guys, and thanks for the time. My first question, just going right to well productivity, looking at slide 10, specifically, Will, I'm just wondering how repeatable this production is, not only in Lee and Eddy counties but as you go down into Texas. And then, I'm just wondering, as you continue to plan throughout this year, maybe more into next year, 26, should we assume more child wells, or sort of the same mix as you've always had? No, I think it'll be very, very similar.

Neal Dingmann: Good morning, guys and thanks for the time.

Neal Dingmann: And just going right to our well productivity looking at slide 10, specifically well I'm just wondering how repeatable is this production not only in Lea and Eddy counties, but maybe you could go down into Texas and then I'm just wondering as you continue the planned throughout this year, maybe more into next year at 46 should we assume more child wells.

Neal Dingmann: Or sort of the same mix as you've always had.

Speaker Change: No I think it would be very very similar Ah I can speak very specifically to kind of 24 to 25, because we've already got basically 25 scheduled kind of all lined out and it's a very very similar well mix our development methodology really hasnt changed from <unk>.

Will Hickey: I can speak very specifically to kind of 24 to 25, because we've already got, you know, basically a 25 schedule kind of all lined out. And it's a very, very similar well mix. Our development methodology really hasn't changed from 2022, 2021, 2023. Now you're seeing it in 24.

Speaker Change: 2022 2021 'twenty two 'twenty three now youre seeing it in 'twenty four and I would expect you'd see this again in 2005 and 26, just we are kind of methodically marching across the position.

Will Hickey: And I'd expect you to see this again in 25 and 26. Just, you know, we are kind of methodically marching across the position, joining the right size pads to make sure to minimize any future degradation. And you're seeing kind of that flatten out capital efficiency. Should be quiet, kind of a no story, no news. There's good news on the well productivity side for us in the years to come. It's fantastic here.

Speaker Change: I joined the right sized pads to make sure to minimize kind of any future degradation.

Speaker Change: Seeing kind of that flattened out the capital efficiency.

Speaker Change: Should be quiet kind of note no story no news is good news on the well productivity side for us for years to come.

Speaker Change: It's been fantastic heater, and then well for you or James just on my second is just a new ground game.

Speaker Change: You've done a great job or sell in in some larger deals which have been notable could you speak to the degree of upside that the bolt ons trades. The grassroot efforts will continue to provide it seems like that certainly was a big deal even here recently.

James: And then, well, for you, James, my second question was just on your ground game. You know, while you've done a great job with Earthstone and some larger deals, which have been very notable, could you speak to the degree of upside that the bolt-on trades and grassroots efforts will continue to provide? Because it seems like that certainly was a big deal even here recently. Yeah, I mean, we obviously put out that release in January that went through a lot of that detail. I have a slide in the back here.

Speaker Change: Yeah, I mean, we obviously put out that release in January that went through all of that detail I have a slide in the back here, but I think our ground game in the Delaware is awesome. We've got incredible land team an incredible business development team that kind of everyday are out there doing deals looking to accretively add acreage in places a lot of people aren't looking so really cool status I mean, I think you've seen this but we did.

Neal Dingmann: But I think our ground game in Delaware is awesome. We've got an incredible land team, and an incredible business development team that are out there, you know, doing deals looking to add acreage in places a lot of people aren't looking. So really cool some stats. I mean, I think you've seen this, but we did 145 acquisitions last year that added almost 17,000 net acres to our position. I think that's just a little piece of the PR secret sauce that drives value in a different way than I think a lot of our peers are doing. But it's something we think we can continue to do. I'd say those small deals, you know, the pipeline still feels really good for 2024 and 2025, and I think we're confident we will continue to get the right deals done at the right prices. Great guys, thanks.

Speaker Change: 145 acquisitions last year that added almost 17000 net acres to our position and I think thats just a little piece of the PR secret sauce that that drives value in a different way than I think a lot of our peers are but it's something we think we can continue to do I would say those small deals.

Speaker Change: Our pipeline still feels really good for 2024, and 2025 and I think we're confident we continue to get the right deals done at the right prices.

Speaker Change: Great guys. Thanks.

Speaker Change: Thanks, Neal I feel.

Speaker Change: Your next question comes from the line of Gabe Daoud from Cowen. Your line is now open.

Gabriel J. Daoud: Thanks, guys.

Gabriel J. Daoud: For taking my questions I guess, what we'd like to hit on first just you talked about the.

Gabriel J. Daoud: Thanks, Neal. Your next question comes from the line of Gabe Daoud from E.D. Cowens.

Gabriel J. Daoud: The increasing pad size and you obviously highlighted the target that you'll be going after in the Delaware I was just wondering if you could overall refresh our memory on where the pad size or project size is going this year relative to last year and then just let the facing kind of looks like for this year.

Gabriel J. Daoud: Your line is now open. Thanks, guys. Thanks for taking my questions. I guess what I would like to hit on first is just the increasing pad size, and you obviously highlighted the targets that you'll be going after in Delaware. I was just wondering if you could overall refresh our memory on where the pad size or project size is going this year relative to last year, and then just what the facing kind of looks like for this year and the Delaware Act. Yeah, I mean, it ends up being a couple wells per pad bigger than where we were last year, but this isn't really a change in any kind of spacing or anything from a development perspective. It's more just as we look at the footprint of the acreage we're drilling, we've got some wider fairways than maybe we had the year before, which calls for slightly larger pads. So, you know, it's factually correct.

Gabriel J. Daoud: In the Delaware.

Speaker Change: Yes.

Speaker Change: It ended up being a couple a couple of wells per pad bigger than where we were last year, but this isn't really a change in kind of spacing or anything from a development perspective, it's more just <unk>.

Speaker Change: As we look at the footprint of the acreage we're drilling we've got some wider fairways than maybe we had the year before which calls for slightly larger pads.

Speaker Change: It's factually correct, our average pad size will be a couple of wells higher this year than it was last year, but I wouldn't view that as any bit of a change in have development philosophy, it's more just that.

Speaker Change: The acreage that we're drilling this year calls for slightly larger pads to keep a consistent development methodology and really nothing more than that.

James: Our average pad size will be a couple wells higher this year than it was last year, but I wouldn't view that as any bit of a change in any kind of development philosophy. It's more just that the acres that we're drilling this year call for slightly larger pads to keep with a consistent development methodology, and really definitely more than that.

Speaker Change: Okay got it understood. Thanks for that and then I guess as a follow up could you.

Speaker Change: Maybe just talk a little bit about that 25% non D&C capital what kind of infrastructure projects.

Speaker Change: That a similar level of spend we should expect on infrastructure and.

Gabriel J. Daoud: Okay, got it, understood. Thanks for that. And then I guess as a follow-up, could you... Maybe just talk a little bit about that 25% non-DNC capital, what kind of infrastructure projects and is that a similar level of spend we should expect on infrastructure in 25 and beyond? No, look, really what it is this year is it's a little bit of catch-up on the Earthstone side, just kind of some stuff where we want to go kind of build out some batteries and some stuff to PR way, so there's a little bit of kind of incremental catch-up cost this year with Earthstone and a little bit of kind of some of the gathering side to make sure that we're continuing to have you know really really good takeaway in New Mexico like we've always had, but I think of it more as kind of one time in nature and as you look forward we're probably back to that you know I don't know 15% or something like that on a total percent of capital budget for infrastructure spend. Cool. Got it.

Speaker Change: In 'twenty five and beyond.

Speaker Change: No.

Speaker Change: What it is this year, it's a little bit of catch up on the <unk> side, just kind of some stuff, where we want to go kind of build out some batteries in some stuff the PR way that so theres, a little bit of kind of incremental catch up costs. This year with our stone and a little bit of kind of some of the gathering side to make sure that we're continuing to have really really good takeaway new Mexico like we've always had but I think of it more.

Speaker Change: Kind of onetime in nature and as you look forward, we're probably back to that I don't know, 15% or something like that on a total percent of capital budget for infrastructure spend.

Speaker Change: Got it thanks guys.

Speaker Change: Your next question comes from the line of Zack <unk> from Jpmorgan. Your line is now open.

Zack: Good morning, guys. Thanks for taking my question.

Zack: First we've heard from some of your peers about some natural gas processing tightness in new Mexico, that's been a headwind as it has been an issue for you all at all and maybe talk about how you manage this issue.

Speaker Change: Do you see anything.

Zach Parham: Thanks guys. Your next question comes from the line of Zach Parham from J.P. Morgan. Morning, guys.

Speaker Change: Impeding the 24 program as far as a processing standpoint.

Speaker Change: No I mean, we're in a really fortunate position that we've got the right long term midstream partners in Investor Day, We said that I would call. It in the past that Unfortunately, we're part of some of the kind of biggest and best natural gas processors and transporters in the basin, that's kind of both in and new Mexico, and Texas and looking back historically, we've really never had any issues.

Zach Parham: Thanks for taking my question. First, we've heard from some of your peers about some natural gas processing tightness in New Mexico that's been a headwind. Has this been an issue for y'all at all? And maybe talk about, you know, how you've managed this issue and if you see anything impeding the 24 program as far as a processing standpoint? No, Zach.

Speaker Change: Don't foresee anything going forward I think.

Will Hickey: I mean, we're in the really fortunate position that we've got the right long-term midstream partners in New Mexico. I think we've said on calls in the past that, fortunately, we're partnered with some of the kind of biggest and best natural gas processors and transporters in the basin, that's kind of both in New Mexico and Texas.

Speaker Change: That's just kind of being in the first position to have the right partners in the right places, but we don't foresee any issues whatsoever on the midstream side.

Speaker Change: Thanks, and my follow ups, just on cash taxes, you got it to 75 billion in cash taxes for 2024 can you give us some color on how you expect cash taxes to trend in 2025 and in future years.

Will Hickey: And looking back historically, we've really never had any issues and don't foresee anything going forward. I think, you know, that's just kind of being in the fortunate position to have the right partners in the right places, but we don't foresee any issues whatsoever on the midstream side. Thanks. And my follow-up question is just on cash taxes.

Speaker Change: Yeah, I mean, we'll start getting closer to a.

Speaker Change: Normal course cash taxpayer beginning in 'twenty five.

Speaker Change: Some sensitivity in 24 at an oil price, obviously, but what we have Nols today.

Zach Parham: You got 75 billion in cash taxes for 2024. Can you give us some color on how you expect cash taxes to trend in 2025 and in future years? Yeah, I mean, we'll start getting closer to a normal course cash taxpayer beginning in 25. We have some sensitivity in 24 to oil prices, obviously, but we have NOLs today, a meaningful portion of which we're using, and we'll start trending to more cash taxes in twenty-five. Take care. Your next question comes from the line of Oliver Huang from TPH. Good morning, all, and thanks for taking my questions. Morning, Oliver.

Speaker Change: Meaningful portion of which we are using and we will start trending to more cash taxes in 'twenty five and beyond.

Speaker Change: Thank you guys.

Speaker Change: Your next question comes from the line of Oliver Huang from <unk>. Your line is now open.

Oliver Huang: Good morning, all and thanks for taking my questions.

Oliver Huang: Good morning Oliver.

Oliver Huang: Great quarter, and Youll have obviously done a good job with integrating the archstone assets ahead of schedule, but just wanted to see if you all might be able to provide some incremental detail to help us better understand the drivers of low moving sustainably lower for both Q4 and four.

Oliver Huang: For the 2024 guide being so quick just kind of looking at where the figure was just six months or so ago as from the Standalone Our stone business.

Oliver Huang: Great quarter, and you have obviously done a good job with integrating the Earthstone assets ahead of schedule, but just wanted to see if you might be able to provide some incremental details to help us better understand the drivers of LOE moving sustainably lower for both Q4 and Q5. For the 2024 guide, being so quick, just kind of looking at where the figure was just six months or so ago as from the standalone Earthstone business. Yeah, I think it's one of the big drivers in LLE.

Speaker Change: Yes, I think it kind of the big drivers.

Oliver Huang: There's two or three things that we're working on it I'd say, one just to give the archstone correct team some credit that theyre la was improving quarter over quarter pretty close I mean it was.

Speaker Change: I think we've we've applied some best practices and some things that are that have kind of helped accelerate that and maybe have a slight step change from where it was headed but but that was kind of coming down on its own. So there was a little bit of tailwind there.

Will Hickey: There are two or three things that we're working on. I'd say one, just to give the Earthstone team some credit, that their LLE was improving quarter-over-quarter pre-close. I think we've applied some best practices and some things that have kind of helped accelerate that and maybe have a slight step change from where it was headed, but the LOE was kind of coming down on its own, so there's a little bit of tailwind there. The overall kind of production profile in Q4 and going forward helps, you know, kind of a bigger denominator obviously is going to help on the LOE side, and then probably the more sticky stuff would be what we're doing on the water disposal side and how we're addressing failure rates and really kind of optimizing artificial lift for the right well set.

Speaker Change: I'd say secondly, just.

Speaker Change: The overall kind of production profile in Q4 and go forward to helps kind of a bigger denominator, obviously is going to help on the OE side, and then and then probably the more sticky stuff would be what we're doing on the water disposal side and how we're addressing kind of failure rates and really kind of optimizing artificial lift for the right well set we've got a.

Speaker Change: And the best practices of PR or we don't we're not a blanket gas lift company, we're not a blanket ESP company, we're not a blanket Spangled company. It is really a we challenge every engineer over every area to build to suit, it's going to put the right lift that the world needs, which will give better run times and lower LOE and we've been really successful go go out to a PR pad across the Delaware you may see a different level.

Will Hickey: We've got a, kind of, best practices at PR are we're not a blanket gas lift company, we're not a blanket ESP company, we're not a blanket spagel company, it's really a challenge for every engineer over every area to build it to suit, it's going to put the right lift that the well needs, which will give better run times and lower LOE, and we've been really successful. You know, if you go out to a PR pad across the Delaware, you may see a different lift type and, you know, two wells that are very close to each other in the same area because that's what they call for, and you're starting to see kind of the benefits of that pretty quickly. So there's a lot more to come.

Speaker Change: <unk> type in two.

Speaker Change: Two wells that are very close to each other in the same area because thats, what they call for and Youre starting to see kind of the benefits of that pretty quickly. So there's a lot more to come there look I think that we can do some stuff on the water disposal side in a bigger way we've had some some quick wins, where we had good water contracts are good water disposal solutions, our water recycling solutions in areas that.

Speaker Change: Our seven wells didn't have that tie in and which are kind of right offset us but go forward Alex.

Will Hickey: Look, I think that we can do some stuff on the water disposal side in a bigger way. You know, we've had some quick wins where we had good water contracts or good water disposal solutions or water recycling solutions in areas that Earthstone wells didn't have that tie-in, which would kind of offset us, but going forward, I'd expect we'll continue to tackle the LOE side of things, really with respect to water. OK, that's certainly helpful. And maybe for a follow-up.

Speaker Change: That will continue to tackle the low side on the really really with respect to water.

Alex: Okay. That's certainly helpful and maybe for a follow up.

Speaker Change: Good to see some of the drilling and completion efficiency improvements starting to be realized right off of that for us now.

Speaker Change: But just with the understanding that there is still a solid running room to kind of converge those well costs towards the legacy PR business.

Oliver Huang: I mean, definitely good to see some of the drilling and completion efficiency improvements starting to be realized right off the bat for Earthstone, but just with an understanding that there's still solid running room to kind of converge those well costs towards the legacy PR business. I just wanted to see how much of that future benefit has already been taken into account when kind of looking at the DNC budget that you all have laid out for this year. It has been taken into account.

Speaker Change: Just wanted to see how much of that future benefit has already been taken into account when kind of looking at the D&C budget that you all have laid out for this year.

Speaker Change: It is taken into account so I.

Speaker Change: I would say from what we have line of sight on and expect to get all of it obviously we are.

Speaker Change: We are hopeful and kind of doing everything came to try to get more but the budget does take into account the synergies that we've achieved to date and expect to achieve between now and year end.

Will Hickey: So I, you know, I say from what we have line of sight on, expect to get all of it. Obviously, we're hopeful and kind of doing everything we can to try to get more, but the budget does take into account the synergies that we have achieved to date and expect to achieve between now and year-end. Awesome.

Speaker Change: Awesome I appreciate the color guys.

Speaker Change: Thanks Oliver.

Speaker Change: Your next question comes from the line of needle Mariani from Rock N. P. M. Your line is now open.

Speaker Change: Okay.

Needle Mariani: Hi, guys.

Needle Mariani: I think it's very very strong production here.

Needle Mariani: Fourth quarter and I was hoping you can provide a little bit more detail I mean could you get some some extra wells on where theres some extra non op.

Leo Mariani: Yeah, thanks, Oliver. Your next question comes from the line of Leo Mariani from Roth MKM. Your line is now open. Hi, guys. It's very, very strong production here, you know, during the fourth quarter, and I was hoping you could provide a little bit more detail. I mean, did you get some extra wells on?

Needle Mariani: Benefit obviously, you just had very strong growth in both oil and total volumes I guess my understanding was that you maybe had a few quite.

Needle Mariani: Quite a few wells that were turned in line this quarter versus last but perhaps a mistake and so maybe you could just provide a little bit more color on the dynamic there.

Will Hickey: Were there some extra non-op, you know, benefit? Obviously, you just had, you know, very strong growth in both oil and total volumes. And I guess my understanding was that you maybe had quite a few wells that were brought in line this quarter versus last, but perhaps I'm mistaken. So maybe you could just provide a little bit more color on the dynamic there. Yeah, I mean, I tried to address some of that in the script, Leo.

Speaker Change: Yeah, I mean, I tried to I tried to address some of it in the script <unk> I'd say the biggest driver would just be well outperformance that the Earth's to legacy <unk> wells and the PR wells, we brought online in the quarter just outperformed even our expectations. So that's going to be kind of more than half of the volume beat for the for the quarter. The balance is going to be made.

Will Hickey: I'd say the biggest driver would just be well outperformance. The legacy Earthstone Wells and the PR Wells we brought online in the quarter just outperformed even our expectations. So that's going to be kind of more than half of the volume beat for the quarter.

Needle Mariani: We were able to make some material progress on downtime on the Archstone assets in Q4 kind of a step change in less downtime, so better run time than kind of what we had budgeted for and what we've seen historically, which really helps US Q4 production and then lastly, being we did bring some more wells in the quarter I don't know the exact number as it was.

Will Hickey: The balance is going to be made up of: we were able to make some material progress on downtime on the Earthstone assets in Q4, kind of a step change in less downtime, so better runtime than kind of what we had budgeted for and what we've seen historically, which really helps with Q4 production. And then lastly, we did bring some more Wells into the quarter. I don't know the exact numbers.

Needle Mariani: A couple of wells.

Needle Mariani: So a couple of wells with a meaningful amount of producing days into the quarter that were expected to be in 'twenty, four and again thats just going to be we didn't expect to start drilling, 35% faster and fracking, 20% faster on the Archstone assets effectively day, one and we were so that just kind of brought some activity end of the quarter.

Leo Mariani: It was a couple of Wells. Uh, so, you know, a couple of Wells was some meaningful amount of producing days into the quarter that were expected to be in 24. And again, that's just going to be, we didn't expect to start drilling, you know, 35% faster and fracking 20% faster, uh, on the Earthstone assets effectively day one. And, and we were, so that just kind of brought some activity. Okay, now that's helpful in terms of all that color.

Speaker Change: Okay. That's helpful in terms of all of that color.

Speaker Change: And then just looking at <unk>.

Speaker Change: 2024, I think you guys had mentioned that Capex is a little bit.

Speaker Change: Front half weighted.

Speaker Change: Generally expect it to decline during the course of the year and I'm guessing production is maybe a little bit of a mirror of that would you generally expect first quarter to be the low on production it's kind of.

Will Hickey: And then just looking at, you know, 2024, I think you guys had mentioned that CapEx is a little bit, you know, front-half weighted. I mean, you generally expect it to decline during the course of the year. And I'm guessing production is maybe a little bit of a mirror of that. Would you generally expect the first quarter to be the lowest in production? And it's kind of, you know, build a bit throughout the year. Just any color you have around this kind of cadence in 2024 would be helpful.

Speaker Change: A bit throughout the year, just any color you have around kind of cadence in 'twenty four would be helpful.

Speaker Change: Yes, I think how you said it is right capex is a little bit front.

Speaker Change: Front half weighted and production is a little bit back half weighted but it's not it's not giant swings I'd say, it's kind of it's pretty modest but what you said was just right.

Speaker Change: Alright, thanks, guys.

Speaker Change: Thanks, Dave.

Needle Mariani: Your next question comes from the line of Doug <unk> from Bank of America. Your line is now open.

Needle Mariani: Hey, Good morning. This is John Abbott on for Doug Leggate. Thank you for taking our questions.

Will Hickey: Yeah, I think how you said it is right. CAPEX is a little bit front half-weighted, and production's a little bit back half-weighted, but it's not giant swings. I'd say it's pretty modest, but what you said was just right.

John Abbott: The first question is just sort of in your Midland position.

Needle Mariani: Okay.

John Abbott: What is your current production at that position.

Needle Mariani: And then just given the continued interest in Permian passes what is your latest thoughts.

Leo Mariani: All right, thanks guys. Thank you. Your next question comes from the line of Doug Legate from Bank of America. Your line is now open. Hey, good morning. This is John Abaddon on behalf of Doug Leggett.

Needle Mariani: On what you do with that position here and also the possible timeframe.

Speaker Change: Yeah. So the minimum position is about 20000 barrels of oil per day, and about 60000 BOE a day and that's a great cash flow business I think the <unk> team and our PR team have that in a really good place where we've got.

Doug Legate: Thank you for taking our question. The first question is just on your midman position. What is your current production on that position? And then, given the continued interest in Permian assets, what are your latest thoughts on what you do with that position and also the possible time?

Needle Mariani: Consistent low declines low cost et cetera, so we like having it I think I'd say we are.

Needle Mariani: We're doing a couple of wells on that asset the first half of this year and pretty excited on what our team has done to date just on the cost side I think there could be some.

Needle Mariani: Meaningful cost reductions there that are a big boost to the value of that asset but.

Will Hickey: Yeah, so the minimum position is about 20,000 barrels of oil per day and about 60,000 BOE a day. And, you know, it's a great cash flow business. I think the IRSTM team and our PR team have that in a really good place where we've got, you know, consistent low declines, low cost, etc. So we like having it.

Needle Mariani: I think over the long term, we've been really clear, where our Delaware basin focused business and Thats, where the majority of our capital our time and our energy are focused so I don't think were going to do anything strategic with the Midland basin asset in the near term, but I think over time as we better understand that asset if theres ways to extract more value other than owning it I'd say, we're kind of all.

Needle Mariani: The errors, but I'd say, that's probably a down the road most likely a 2025 type of thing if if we look to do anything at all.

Will Hickey: You know, I think I'd say, you know, we're doing a couple of wells on that asset the first half of this year and pretty excited about what our team has done to date just on the cost side. I think there could be some, you know, meaningful cost reductions there that are a big boost to the value of that asset. But, you know, I think over the long term, we've been really clear we're a Delaware Basin focused business, and that's where the majority of our capital, our time, and our energy are focused. So I don't think we're going to do anything strategic with the Midland Basin asset in the near term. But I think over time, as we better understand that asset, if there are ways to extract more value other than owning it, I'd say we're kind of all ears.

Speaker Change: I appreciate it and then for a follow up question, while it is not your focus necessarily.

Speaker Change: How do you sort of think about long term maintenance capex.

Speaker Change: Can you sort of look at the midpoint of your guidance of $100 million less than that how do you think about long term maintenance capex for your business.

Speaker Change: Yes, I think Thats right I mean, just given all the kind of integration and acquisitions over the last six months, it's kind of hard to peg.

Speaker Change: What production level, youre, calling maintenance, but I think if youre going to predict for peg.

Speaker Change: <unk> kind of where we were in Q4 or will be in Q1.

Speaker Change: And then kind of maintenance capex to be exactly what you said I think it's about $200 million less than the midpoint of guidance something like that.

Will Hickey: But I'd say that's probably down the road, most likely a 2025 type of thing if we look to do anything at all. And then for our follow-up question, while it is not necessarily your focus, how do you sort of think about long-term maintenance, Katharine? I mean, if you sort of look at the midpoint of your guide, it's several hundred million dollars less than that.

Speaker Change: Alright, Thank you very much for taking our questions.

Speaker Change: Yes happy to John.

Speaker Change: Your next question comes from the line of John Ennis from Stifel. Your line is now open.

John Ennis: Hey, good morning, guys and congrats on the strong quarter.

John Ennis: My first question digging further into your comments around downtime.

Will Hickey: How do you think about the long-term maintenance cap? Yeah, I think that's right. I mean, just given all the kind of integration and acquisitions over the last six months, it's kind of hard to peg what production level you're calling maintenance. But I think if you're gonna predict, roughly, kind of where we were in Q4, or where we'll be in Q1, and then the amount of maintenance capital should be exactly what you said. I think it's about $200 million less than the midpoint of guide, something like that.

John Ennis: Earth Stones pardon me primary resource of downtime and what were some of the specific practices in the field you've implemented to minimize it.

John Ennis: There's two ways to attack downtime one is.

John Ennis: Lower failure rate, just kind of an easiest and most sticky best thing to do is lower failure rate and although I think that is in progress that takes a little longer and the second is with wells go down to just get on them quicker.

Doug Legate: All right, thank you very much for taking our questions. Yes. Your next question comes from the line of John Annis from Stiefel. Your line is now open.

Speaker Change: Try to have turnaround time on a well that fails b, a day or measured in Ed day or measured in hours not measured in a week or weeks in.

John Annis: Hey, good morning guys, and congrats on the strong quarter. For my first question, digging further into your comments around downtime, what was Earthstone's primary primary source of downtime and what were some of the specific practices in the field you implemented to minimize it? There are two ways to attack downtime. One is lower failure rate, just kind of the easiest and most sticky best thing to do. Lower failure rate, and although I think that is in progress, that takes a little longer.

Speaker Change: Well, it's a little bit of that it's a little bit of kind of what I said there was some tailwind on the <unk> asset the team had done a good job of starting to address some of these problems over the last six months. So we kind of stepped in at a time, where we were set up to succeed and I think.

Speaker Change: The people the people on the person team that would become part of the PR team. We're excited to kind of do things to PRA and really jumped jump headfirst into it and so.

Will Hickey: And the second is when wells go down, you just get on them quicker. You know, try to have the turnaround time on a well that fails be a day or measured in a day or measured in hours, not measured in a week or weeks. Well, it's a little bit of that, it's a little bit of kind of what I said, there are some tailwinds on the Earth for NASA. The team had done a good job of starting to address some of these problems over the last six months. So, we kind of stepped in at a time when we were set up to succeed, and I think, you know, the people on the Earthstone team that have become part of the PR team were excited to kind of do things the PR way and really jump head first into it.

Speaker Change: We've picked up the low hanging fruit things like that I think we will go get now is hopefully kind of really start to improve run times, which is the is the best way to lower LOE increased run time.

Speaker Change: Terrific for my follow up referencing slide seven and where you stack up against peers in terms of cash cost is quite impressive, especially with the Delaware being a little heavier in water production. What's your sense of the biggest delta between you and other Delaware Delaware operators.

Speaker Change: I think I mean.

Speaker Change: What helps us if you compare to other operators really in general one is we don't have a lot of old vertical wells, we've got relatively clean new horizontal production, which which really helps keep costs down I think it is a it's a great asset of ours, we don't have.

Will Hickey: And so, you know, we've picked up the low-hanging fruit, things like that. I think where we'll go now is, hopefully, really start to improve run times, which is the best way to lower LOE and increase performance. Terrific. For my follow-up, referencing slide seven and where you stack up against peers in terms of cash costs, it's quite impressive, especially with the Delaware being a little heavier on water production. What's your sense of the biggest delta between you and other Delaware operators? I think, I mean, what helps us if you compare us to other operators in general is that we don't have a lot of old vertical wells. We've got relatively clean, new horizontal production, which really helps keep costs down.

Speaker Change: A lot of vertical wells that kind of increase the cost structure and then we have great assets. So if you think about where assets sit within the Delaware basin. Although I think it's a fair statement. So theres more water on average where in some of the oily as places in the whole basin on.

Speaker Change: Oil cut percentage, we're not in any places that have.

Speaker Change: A very few places like high <unk> treatment nothing like that we are in the kind of based on the core of the basin.

Speaker Change: And then look this is what we do we are a low cost operator, we focus on controlling the things that we can control.

Will Hickey: I think it's a great asset of ours; we don't have a lot of vertical wells that kind of increase the cost structure, and then we have great assets. So if you think about where assets sit within the Delaware Basin, although I think it's a fair statement that there's more water on average, we're in some of the oiliest places in the whole basin on an oil cut percentage. We're not at any places that have, you know, or very few places that have, like, high H2S treatment, none, nothing like that.

Speaker Change: We tried to be the lowest on the D&C side, the lowest on the low side and in the lowest on the G&A side and so I think that's what shows up here.

Speaker Change: The thing I'd add to that is we have a real awesome culture. The field with an ownership mindset like I think we spent a lot of time answering questions on on managed management ownership management stock et cetera, but I think whats honestly, probably more impactful that is at ownership mindset in the field, where our team is incredibly proud of what they do and worked incredibly hard in the field to two <unk>.

Will Hickey: We are in the kind of basinal core of the basin, and then look, this is what we do. We are a low-cost operator. We focus on controlling the things that we can control.

Will Hickey: Fixed wells as soon as they go down and kind of waste no time waste no effort and kind of getting the right things to run the business the right way Don So I think it's that ownership mindset that we've talked about a lot at the top but really permeates through the entire Permian resources organization that I don't think that gets enough credit.

Will Hickey: You know, we try to be the lowest on the DNC side, the lowest on the LOE side, and the lowest on the GNA side. So I think that shows. I think the only thing I'd add to that is we have a real awesome culture in the field with an ownership mindset. Like, I think we spend a lot of time answering questions on management, ownership, management, stock, etc.

Speaker Change: Great color, thanks for taking my questions.

Will Hickey: Your next question comes from the line of Paul Diamond from Citi. Your line is now open.

Speaker Change: Thank you and good morning, all and thanks for taking my call just a quick one on valuation you talked about the potential opportunity for you and similarly sized peers to re rate versus those larger.

Will Hickey: And I think what's honestly probably more impactful than that is that ownership mindset in the field, where our team is incredibly proud of what they do and works incredibly hard in the field to fix wells as soon as they go down and kind of waste no time, waste no effort, and kind of get the right things to run the business the right way done. So I think it's that ownership mindset that we've talked about a lot at the top, but it really permeates through the entire Permian Resources organization, and I don't think that gets enough credit. Great color,

Paul Diamond: Wanted to get your get a bit more detail on what type of catalyst.

Will Hickey: You anticipate to see to kind of close that gap.

Speaker Change: Yes, I mean, I think for US I think it's all about execution I think we I think the market is starting to realize the quality of our business looks a lot more like the other Permian pure plays and then other large caps, albeit at a smaller scale, but I think over time as we can continue to execute quarter in quarter out and year end year out I think that.

Will Hickey: That re rating happens on its own I think it's kind of it's kind of too obvious to mess and the most important thing for us is to execute and continue to be the lowest cost operator in the Delaware.

John Annis: Thanks for taking my question. Your next question comes from the line of Paul Diamond from Citi. Your line is now open. Thank you. Good morning, all.

Speaker Change: Understood. Thank you just a quick follow up as you guys.

Paul Diamond: Thanks for taking my call. Just a quick one on valuation. You talked about the potential opportunity for you and similarly sized peers to re-rate versus those larger. I just want to get a bit more detail on what type of catalysts you think or you anticipate to see to kind of close that gap. Yeah, I mean, for us, I think it's all about execution.

Will Hickey: Thinking about the go forward cadence on P&C improvement you've already captured at 12% you know some more is coming from the fourth generation of <unk>.

Paul Diamond: You can kind of an understanding of your guys view on the quantum you can expect going forward.

James: You know, I think the market has started to realize that the quality of our business looks a lot more like the other Permian pure plays than other large caps, albeit at a smaller scale. But I think over time, as we can continue to execute quarter in quarter out, year in year out, you know, I think that the re-rating happens on its own. I think it's kind of it's kind of too obvious to miss.

Paul Diamond: And the late 'twenty, four and 'twenty five and beyond.

James: I think.

James: It's two different ways to think about I think on the Earth's stone asset specifically, we expect over the coming months those cost to converge with the legacy PR costs, where we don't really talk about legacy.

James: <unk> legacy PR anymore. It's just these are Permian resources, well cost by area.

Paul Diamond: And the most important thing for us is to execute and continue to be the lowest cost operator in Delaware. Thank you. Just a quick follow up. As you guys think about the go forward cadence on D&C improvement, you have already captured that 12%, and we know some more is coming from the full integration of Earthstone. I can kind of get an understanding of your guys' view on the quantum you can expect going forward, like in late 24 and 25 and beyond. I think it's, you know... It's two different ways of thinking about it.

James: And thats well on its way and I expect to be there in short order and then.

Speaker Change: What does that mean for absolute.

Speaker Change: Our D&C cost.

Speaker Change: What we laid out at this 860 a foot.

Speaker Change: The guide for the year this year.

Paul Diamond: That's based on what we're seeing real time today. So we're not we're not baking in further efficiencies are further deflation I think we're hopeful we'll get a little bit of each of those kind of over the coming years, but but again, we've made a ton of progress recently and I think kind of.

James: I think on the Earthstone assets specifically, we expect in the coming months those costs to converge with the legacy PR costs, where we don't really talk about legacy Earthstone or legacy PR anymore. It's just these are Permian resources, well-cost by area, and that's well on its way, and I expect it to be there in short order. And then

James: More expected to see that kind of gradual.

James: Gradual decreases in costs no more of the kind of step change we've seen over the last four quarters.

Speaker Change: Understood appreciate the clarity there.

Speaker Change: Okay. Thanks.

James: What does that mean for absolute PR, D&C costs? What we laid out is this $860 a foot is kind of the guide for the year this year. That's based on what we're seeing, you know, in real time today. So, you know, we're not baking in further efficiencies or further deflation.

James: Your next question comes from the line of Phillips Johnston from capital One your line is now open.

Speaker Change: Hey, guys. Thank you first just to follow up on Neil's question on well productivity slide.

James: Slide nine you show an expected 3% increase in your average.

James: I think we're hopeful we'll get a little bit of each of those in the coming years. But again, you know, we've made a ton of progress recently. And I think it's more expected to see that kind of gradual decrease in cost, not more of the kind of step changes you've seen over the last...

Phillips Johnston: Productivity this year is in the Delaware.

James: Is that mainly a function of geographic mix shifts with 70% of your activity.

James: Towards Mexico, then versus the 40% last year or there other factors driving that.

Speaker Change: No well mix it would be the biggest factor there youre spot on.

Phillips Johnston: I appreciate the clarity over there. Your next question comes from the line of Phillips Johnston from Capital One. Your line is now open.

Phillips Johnston: Okay.

Speaker Change: I assume that's all taken your 24 guidance right.

Phillips Johnston: Yes.

Phillips Johnston: Okay.

Will Hickey: Hey guys, thank you. First, just to follow up on Neal's question on well productivity, slide nine, you show an expected 3% increase in your average productivity this year versus the last year in Delaware. Is that mainly a function of the geographic mix shifts with, you know, 70% of your activity going towards Mexico versus the 40% last year, or there are other factors? No, well-mixed would be the biggest factor there.

Phillips Johnston: And then just.

Phillips Johnston: Last question just.

Will Hickey: Next 12 months' PDP decline.

Will Hickey: So it sounded in your year end 'twenty three reserve report and.

Phillips Johnston: Would you expect that decline rate could change significantly between now and the end of this year.

Speaker Change: Sorry, what's the second part of that question again here real quick.

Will Hickey: Yes.

Will Hickey: Looking for just PDP decline rate that Netherlands, So assumed in your reserve report in that.

Subash Chandra: You're spot on. Subash Chandra, Uh, I assume that's all taken to your 24 gauge, right? Yes. And then just, uh... the next 12-month PDP decline that Bill and Sol assumed in your year-end 23 reserve report and, Would you expect that decline rate to change significantly between now and the end of this year? Sorry, what's the second part of that question again? Can you repeat that real quick?

Subash Chandra: Just as a follow up would you expect that that decline rate to change significantly between now and the end of this year.

Subash Chandra: I can't say I've hand, what Netherlands tools Reserve report says, but but I can say, what we say which is in the low <unk> kind of.

Oliver Huang: Low to mid <unk> on a on a decline and then.

Will Hickey: Yeah, just I'm looking for the PDP decline rate that Nellensol assumed in your reserve report and then, as a follow-up, would you expect that decline rate to change significantly between now and the end of this year? I can't say offhand what the Netherland Shoals Reserve Award says, but I can say what we say, which is it's in the low 30s, kind of, low to mid 30s on a BOE decline. And then, Do I expect it to change? Sure, yeah. Every year it should, you know, especially years where we're not having a significant amount of growth like we had last year. You'll see that decline will slowly arrest. I'm not sure it's gonna be.

Subash Chandra: Yeah.

Subash Chandra: Do I expect it to change sure, yes every year, it should especially years, where we're not having.

Will Hickey: The significant amount of growth like we had last year Youll see that decline was slowly arrest I don't not sure it's going to be back home.

Will Hickey: Significant but yes.

Will Hickey: That decline will continue to to shallow out between now and year end.

Will Hickey: Okay.

Speaker Change: Thank you.

Will Hickey: Your next question comes from the latest Sebastian Chandra from Benchmark. Your line is now open.

Will Hickey: Super significant, but yeah, that decline will continue to shallow out between now and year-end. Yep, okay, makes sense. Thank you. Your next question comes from the line of Subash Chandra from Benchmark.

Speaker Change: Yes, thanks, guys.

Subash Chandra: The 150 ish type transactions 17000 acres.

Subash Chandra: Your line is now open. Yeah, thanks, guys. The 150 ish type, you know, transaction 17,000 acres of, I think the metrics you threw out, what do you think the dollar per location map has worked out to? You know, we haven't, we kind of intentionally haven't published that in a lot of these, especially smaller transactions. I think there's probably some competitive dynamics that are important to keep tied to the vest and some, frankly, some confidentiality there. But, you know, I'd say the dollar per location is going to be in the pretty low single digit millions if that gets you in the right direction.

Subash Chandra: The metrics you throw out.

Subash Chandra: What do you think the dollar per location map has worked out too.

Subash Chandra: We haven't we kind of essentially haven't published that in a lot of these especially smaller transactions I think theres, probably some <unk>.

Subash Chandra: <unk> dynamics that are important to keep tied to the vast and some frankly, some confidentiality there but.

Subash Chandra: I'd say the dollar per location is going to be.

Subash Chandra: And the pretty low single digit millions if that if that gets you in the right direction.

Speaker Change: Yeah, Yeah, that's directionally that's cool.

Will Hickey: That's cool. And secondly, you know, on the integration costs, are they all done at this point? Or should we see any kind of flow into 24? 20, about 20 in the first half.

Subash Chandra: And then secondly on the integration costs are are they all done at this point or should we see anything kind of flow into 'twenty four.

Will Hickey: 20 about 20 in the first half of the year.

Will Hickey: Another $20 million, got it, and then Don...

Will Hickey: Another $20 million.

Will Hickey: Yes.

Speaker Change: Got it okay and they're done.

Operator: Thank you. Bye. There are no further questions at this time.

Will Hickey: Yeah.

Will Hickey: Yeah.

Operator: There are no further questions at this time I will now hand, the call back to James <unk> for closing remarks.

James: I will now hand the call back to James Walter for closing remarks. In closing, I just want to say that we believe our Q4'23 results in our 2024 Go Forward plan speak for themselves and demonstrate just how good our Permian business is. As the lowest cost operator in the Delaware Basin, we believe that we are positioned to continue to generate significant returns for our shareholders as we build our track record of consistent low cost execution year in and year out. Thanks to everyone for joining the call today and following the Permian Resources story. Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect, www.globalonenessproject.org, produced by Working For a Dream

Speaker Change: In closing I, just want to say that we believe our Q4 'twenty three results and our 2020 forward go forward plan to speak for themselves and demonstrate just how good our Permian business is or the other.

James: <unk> operate in the Delaware Basin, we believe that we are positioned to continue to generate significant returns for our shareholders as we build our track record of consistent low cost execution year in and year out.

James Walter: Thanks to everyone for joining the call today and following the Permian resources story.

James: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation you may now disconnect.

James: Okay.

James: Yeah.

James: Yes.

James: Okay.

James: [music].

James: Paul.

James: Okay.

James: Yes.

James: [music].